Correlation Between Citigroup and WisdomTree Interest

Can any of the company-specific risk be diversified away by investing in both Citigroup and WisdomTree Interest at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and WisdomTree Interest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and WisdomTree Interest Rate, you can compare the effects of market volatilities on Citigroup and WisdomTree Interest and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of WisdomTree Interest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and WisdomTree Interest.

Diversification Opportunities for Citigroup and WisdomTree Interest

0.89

Correlation Coefficient

Citigroup  WisdomTree Interest

Very poor diversification

The 3 months correlation between Citigroup and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WisdomTree Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Interest Rate and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with WisdomTree Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Interest Rate has no effect on the direction of Citigroup i.e., Citigroup and WisdomTree Interest go up and down completely randomly.

Pair Corralation between Citigroup and WisdomTree Interest

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.31 times more return on investment than WisdomTree Interest. However, Citigroup is 7.31 times more volatile than WisdomTree Interest Rate. It trades about 0.14 of its potential returns per unit of risk. WisdomTree Interest Rate is currently generating about 0.1 per unit of risk. If you would invest  6,042  in Citigroup on September 4, 2024 and sell it today you would earn a total of  1,100  from holding Citigroup or generate 18.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  WisdomTree Interest Rate

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Interest Rate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Interest Rate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, WisdomTree Interest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and WisdomTree Interest

The main advantage of trading using opposite Citigroup and WisdomTree Interest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, WisdomTree Interest can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WisdomTree Interest will offset losses from the drop in WisdomTree Interest's long position.

The idea behind Citigroup and WisdomTree Interest Rate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.